The European Union regulators have initiated a thorough investigation of the $7.4-billion acquisition of Sun Microsystems by software major Oracle.

The European Competition Commission investigation must be completed by 19 January 2010.

"The Commission has to examine very carefully the effects on competition in Europe when the world's leading proprietary database company proposes to take over the world's leading open-source database company," EU commissioner Neelie Kroes said.

The US Department of Justice (DoJ) had given its approval to the deal in late August (See: Oracle's acquisition of Sun approved by US justice dept). 

The European Commision, which is known to take a tough stance on market dominance and anti-competition activities, will now look closely at Sun's Java networking software franchise and database software.

Regulators in the US questioned Oracle's market power in some areas of its business, but raised fewer concerns than the Europeans about open-source software.

In announcing the decision yesterday, Ms Kroes warned that the acquisition could hamper development of an important software product owned by Sun, which specialises in computer hardware.

The product, MySQL, is the most widely used corporate database software in the world, and it competes with software produced by Oracle.

Ms Kroes said preserving access to open-source software was vital when much of the world, including Europe, might just be emerging from a deep slump.

''In the current economic context, all companies are looking for cost-effective IT solutions and systems based on open-source software are increasingly emerging as viable alternatives to proprietary solutions,'' Ms Kroes told reporters.

She said a longer investigation was needed ''to ensure that such alternatives would continue to be available.''

The commission has until 19 January, to decide whether to clear the deal or issue an order blocking it.

But, according to industry experts, the review could take as long as four months, meaning Oracle will have to postpone integration of Sun.

Meanwhile, Sun is losing market share to rivals as its sales plummet, amid uncertainty about Oracle's long-term plans for the company.